Site Mobile Navigation

THE LAW; A Body Blow to Retail Goliaths

AT a time when every new real estate project seems to provoke fierce and protracted resistance at the local level, the New York Court of Appeals has recently granted new protection to local officials whose resistance may cost ''big box'' developers by causing construction delays.

The ruling dismissed two lawsuits, including one in which Home Depot had sought to hold Rye City Council members personally liable for $50 million in damages resulting from delays in store construction.

''This case pitted a small community against one of the country's largest retailers,'' said Robert Hermann, counsel for Thacher, Proffitt and Wood, who represented Rye officials. ''This will send a strong message about how these companies can act.'' The message may carry beyond New York. Legal experts said the consequences of the decision, which upheld an appellate court decision and reversed that of a lower court, might very well be felt throughout the country, in any community fighting the arrival of a large surface retailer.

''This case puts an end to the search for damages from small communities by large retailers,'' said John R. Nolon, a law professor at the Land Use Law Center of Pace University Law School. ''This ruling reinforces a very high threshold for proving damages under federally protected property rights.''

In addition to empowering local residents, the decision reinforces New York's long-held principle of keeping land-use decisions local, said Peter A. Baynes, deputy director of the New York State Conference of Mayors and Municipal Officials.

''Local land use has a very direct impact on residents,'' Mr. Baynes said, ''so it is important that those officials closest to residents make decisions. The reviewing of projects must not take place at a regional, state or federal level.''

For developers, said Philip M. Halpern, who represented Home Depot, the outcome only adds to the bewildering number of differences between state and local land-use rules. ''The rights of developers will be hurt by this decision,'' said Mr. Halpern, whose firm is Collier, Halpern, Newberg, Nolletti and Bock. ''Municipalities and developers require uniform rules on how to deal with each other, and perhaps it will be the U.S. Supreme Court that must decide.''

The decision, written by Chief Judge Judith S. Kaye, grouped two suits finding that local communities had wrongfully denied land-use permits to developers.

In the Home Depot case, the Village of Port Chester approved plans in 1996 to develop a substantial store along its border with the City of Rye, on condition that the retailer obtain permission to widen a nearby road. Because that road, Midland Avenue, runs through both towns, the deal was effectively contingent on Rye's approval.

Officials in Rye did not approve, instead kicking off a battle with Home Depot.

Negotiations eventually yielded a tentative agreement from Rye to allow a widening of the road if Home Depot paid the city $200,000 and made further traffic adjustments. That deal fell apart, however, when the City Council bowed to Rye residents' wishes and rejected the settlement.

By April 1997, nearly 14 months after Home Depot had received initial approval for the store complex from Port Chester, the retailer filed two lawsuits. One sought to force Rye to approve the road widening; the other sought $50 million in damages from the mayor and City Council members, both personally and officially.

''Home Depot sent our City Council the clear message that if you don't agree with us, we will sue you and sue you individually,'' said Steve Otis, the mayor of Rye. ''The City Council was acting to protect the community from the impact of traffic.''

If Home Depot's victory had stood, many people might have been discouraged from seeking local office, Mr. Hermann, the Rye officials' lawyer, pointed out. ''Who is going to be a local official when you serve as a volunteer local official but suddenly find your house is at stake?'' Mr. Hermann said. ''They tried some real intimidation tactics.''

As for the store itself, site approvals for Home Depot expired, thus requiring further environmental review by Port Chester. In approving the project for a second time, Port Chester dropped any requirement for approvals from Rye, allowing the store to open in February 2000.

The other case in the ruling involved a housing developer, Bower Associates, that had received permission from the Town of Poughkeepsie to build a subdivision called Stratford Farms, consisting of 134 detached single-family homes and 51 townhouses.

Permission from Poughkeepsie came on condition of building an access road through adjoining Pleasant Valley.

The developer's application to Pleasant Valley was rejected on the basis of environmental concerns.

The developer took the case to the State Supreme Court, which ruled that Pleasant Valley had acted not out of environmental concern but because it did not stand to make any money from the project.

''The determination was driven largely by community pressure because the Stratford Farms subdivision located in the Town of Poughkeepsie would provide no tax benefit to the Town of Pleasant Valley,'' the Supreme Court ruled.

That ruling in hand, Bower Associates went ahead with the project and filed a lawsuit against Pleasant Valley and its Planning Board for $2 million in damages.

In her judgment, Judge Kaye affirmed a lower court's rejection of Bower's lawsuit.